GIB must continue to engage in green infrastructure projects, urges Aldersgate Group

The UK government must ensure it has a clear strategy in place to attract private finance to deliver its environmental and low carbon policy objectives, said Nick Molho, executive director of the Aldersgate Group, responding to the announcement that the UK government has sold the Green Investment Bank to Australian investment banking group, Macquarie.

A Macquarie-led consortium, comprising Macquarie Group (Macquarie), Macquarie European Infrastructure Fund 5 (MEIF5) and Universities Superannuation Scheme (USS), has acquired GIB for £2.3 billion. Upon completion, Macquarie will be the owner of GIB with ‘special share’ arrangements aimed at safeguarding its green purpose. These will be held by five independent trustees.

The Aldersgate Group’s executive director stressed: “Now that the GIB has been fully privatised and the UK can expect to receive less funding from the European Investment Bank post Brexit, the government must ensure that it has a clear strategy in place to attract private finance to deliver its environmental and low carbon policy objectives. Projects involving new technologies and business models will be required to deliver the UK’s Clean Growth Plan and 25 Year Environment Plan. Targeted government support will be essential to make these projects attractive to private investors such as pension funds.”

Molho urged the Macquarie-led consortium “to honour these commitments and ensure the GIB plays its part in financing the green infrastructure that will be essential to delivering the UK’s climate and environmental policy objectives in the years ahead. Going forward, we also expect the GIB to continue to engage with stakeholders and report transparently on the impact of its green investments”.

Concrete guarantees

Responding to the news, the Environmental Audit Committee issued a statement saying: “The Green Investment Bank is a unique institution, and the largest green energy investor in Europe. The Government have decided to sell it off without transparency or consideration of the alternatives. Macquarie executives and Government ministers need to give concrete guarantees about the bank’s future and the capital investments it will make.”

The Macquarie Group said that upon transaction completion, GIB is expected to manage or supervise over £4 billion of green infrastructure assets and projects.

“Specifically, the Green Investment Bank will establish three new investment vehicles – an offshore wind investment vehicle, a low carbon lending platform and a green infrastructure investment platform,” said Daniel Wong, head of Macquarie Capital, Europe. “We understand the responsibilities that come with this ownership, and we are fully committed to maintaining its green purpose as we grow the business.”

According to Macquarie, the Green Investment Bank will become Macquarie’s platform for principal investments in green infrastructure projects in the UK and Europe. Anticipated investments are expected to span energy efficiency, bioenergy, energy from waste, onshore and offshore wind, solar and tidal energy and energy storage.

“The Green Investment Bank will target investments in both equity and debt and at all project stages including development, construction and operation,” added Wong.

News that GIB’s platform, brand and Edinburgh office will be maintained with “a substantial staff presence in the city” has been welcomed by the Scottish Government's economy secretary Keith Brown. He said: “I welcome the Macquarie Group’s clear commitment to Scotland and the assurances we have received that it will maintain the Green Investment Bank’s unique identity and its focus on the green projects that are key to Scotland’s continued economic success.

“The latest statistics show the number of people employed in the renewable and low carbon industries here has risen to 58,500, highlighting the sector’s strong record of success in Scotland. The Macquarie Group has indicated that staffing levels at the Green Investment Bank’s Edinburgh offices will be maintained and are likely to increase overall in the longer term. We will follow developments closely in the months and years ahead," added Brown.

It has also been announced that the UK Government will invest alongside GIB in a new green infrastructure investment platform which will comprise a small number of the Green Investment Bank’s existing investments.

Of the three new investment vehicles to be established upon completion, long term infrastructure investors USS and MEIF5 are expected to invest in the offshore wind investment vehicle, while USS and GCP Infrastructure Investments will invest in the low carbon lending platform. The Green Investment Bank is anticipated to remain an investor in the offshore wind investment vehicle and the green infrastructure investment platform.

The transaction is expected to complete in the first half of 2017 subject to regulatory approvals and is said not to be material to Macquarie Group’s earnings and financial position.

Lord Smith of Kelvin, independent chair of GIB, stated: “GIB in private ownership can, and should, continue to play an important leadership role in supporting the global low carbon transition and the UK Government’s ambitious plans for a strengthened industrial strategy and emissions reduction.”

Green Purposes Company

The trustees (designate) of the Green Purposes Company (GPC), whose aim is to safeguard GIB’s green purpose, are expected to formally take up their role upon completion of the sale.

The trustees, appointed independently of Government and GBIB, and whose role is unremunderated, comprise:

Tushita Ranchan (Chair), green infrastructure investor and former CEO of a renewable energy company

James Curran, former CEO of Scottish Environment Protection Agency

Trevor Hutchings, previously a senior civil servant at the then Department of Energy and Climate Change (DECC) and currently director of advocacy at WWF.

Robin Teverson, chair of House of Lords EU select sub-committee, energy and environment

Peter Young, environmentalist and former Chair, Aldersgate Group

The trustees’ initial term of appointment is expected to last for five years.